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Teva Pharmaceutical (NYSE: TEVA ) is a global pharmaceuticals company offering a mixture of generic and branded drugs across a myriad of focused therapies.
Today, let's look at three things investors should be watching regarding Teva Pharmaceutical, as they'll provide us with better insight into the company.
1. Teva's branded portfolio
One of the most notable factors about Teva is that not only is it one of the world's largest generic drug manufacturers, but it also has an extensive line of in-house brand-name drugs. Teva's branded-drug portfolio accounted for 39% of its $4.9 billion in total revenue in the second quarter, while also accounting for about 55% of its total sales within the United States.
Leading the charge is its blockbuster multiple sclerosis drug, Copaxone, which currently makes up 20% of Teva's entire revenue stream and grew by 12% over the year-ago quarter, thanks in large part to taking back its distribution and marketing rights from Sanofi (NYSE: SNY ) in Europe and throughout the rest of the world. During the quarter, Teva won a favorable court ruling in both the U.S. and in Europe that will protect its patent exclusivity on the drug through September 2015.
Teva's Parkinson's medication Azilect is another key growth drug within its portfolio. Sales of the drug rose 36% in the second quarter to $95 million, with strength coming from the U.S., U.K, and France.
Teva also added new branded drugs to its portfolio through the purchase of Cephalon, which yielded the company Treanda, a treatment for chronic lymphocytic leukemia, and Nuvigil, a stimulant to treat those with narcolepsy. Both drugs combined totaled about 5% of Teva's total sales in the second-quarter.
2. Teva's generic portfolio
Make no mistake about it: Generic drugs are still the lifeblood of Teva, accounting for 52% of all second-quarter sales. Generics play an important role for Teva because they give the company a seemingly endless supply of new drugs for its pipeline, since branded drugs have a finite patent protection period. Generic drugs also require considerably less research and development cost, since little clinical research is needed.
On the flipside, the generic sector is often highly competitive, and that competition drives the price of these drugs into the floor, lowering margins for many involved (including those poor branded-drug companies that choose to make generic versions of their own ex-patent drugs). For Teva, it's not about hitting a specific treating sector or two, but about developing as many generics as it can. Currently, Teva has in excess of 1,450 different molecules in its drug portfolio.
Teva's generic portfolio is under constant attack from its peers who'd like nothing better than to take market share from Teva. For instance, generic giant Mylan (Nasdaq: MYL ) recently launched a version of Teva's now off-patent drug, Provigil, just last month. Teva also had to defend Copaxone vigilantly against generic threats from both Mylan and Momenta Pharmaceuticals (Nasdaq: MNTA ) , which had both filed applications to sell generic versions of the drug. Ultimately, Teva won that battle – for now.
3. Acquisitions and dividends
Teva has made it quite evident that in addition to expanding its generic-drug portfolio and developing its own line of branded drugs, it will look to make acquisitions to grow. Last year, Teva ponied up $6.8 billion for Cephalon just weeks after the company turned down a bid for $5.7 billion from Valeant Pharmaceuticals (NYSE: VRX ) . Teva also acquired much of its female-health line of drugs and treatments when it acquired generic-drug rival Barr Pharmaceuticals in 2008 for $7.46 billion.
One aspect shareholders have loved watching has been the phenomenal dividend growth from Teva over the years. Even though it doesn't offer a consistent quarter-over-quarter payout, its dividend has grown roughly fivefold over the past decade. As long as Teva's cash flow remains consistent -- and with as many drugs as it possesses, I see no reason why it wouldn't – there's little reason its projected 2.1% yield won't head even higher.
Now that you know what to watch for, it should be easier to analyze Teva Pharmaceutical's successes and pitfalls in the future. I hope what you've learned will give you a competitive investing edge.
If you're still craving even more info on Teva, I would recommend adding the stock to your free and personalized Watchlist so you can keep up on all of the latest news with the company.
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